JP Morgan Chase 2014 Annual Report Download - page 303

JPMorgan Chase & Co./2014 Annual Report 301
acquiring substantially all of the assets of Washington
Mutual Bank from the FDIC, JPMorgan Chase Bank, N.A.
caused Washington Mutual Bank to default on its bond
obligations. JPMorgan Chase and the FDIC moved to dismiss
this action and the District Court dismissed the case except
as to the plaintiffs’ claim that JPMorgan Chase tortiously
interfered with the plaintiffs’ bond contracts with
Washington Mutual Bank prior to its closure. Discovery is
ongoing.
JPMorgan Chase has also filed a complaint in the United
States District Court for the District of Columbia against the
FDIC in its capacity as receiver for Washington Mutual Bank
and in its corporate capacity asserting multiple claims for
indemnification under the terms of the Purchase &
Assumption Agreement between JPMorgan Chase and the
FDIC relating to JPMorgan Chase’s purchase of most of the
assets and certain liabilities of Washington Mutual Bank.
* * *
In addition to the various legal proceedings discussed
above, JPMorgan Chase and its subsidiaries are named as
defendants or are otherwise involved in a substantial
number of other legal proceedings. The Firm believes it has
meritorious defenses to the claims asserted against it in its
currently outstanding legal proceedings and it intends to
defend itself vigorously in all such matters. Additional legal
proceedings may be initiated from time to time in the
future.
The Firm has established reserves for several hundred of its
currently outstanding legal proceedings. In accordance with
the provisions of U.S. GAAP for contingencies, the Firm
accrues for a litigation-related liability when it is probable
that such a liability has been incurred and the amount of
the loss can be reasonably estimated. The Firm evaluates its
outstanding legal proceedings each quarter to assess its
litigation reserves, and makes adjustments in such reserves,
upwards or downward, as appropriate, based on
management’s best judgment after consultation with
counsel. During the years ended December 31, 2014, 2013
and 2012, the Firm incurred $2.9 billion, $11.1 billion and
$5.0 billion, respectively, of legal expense. There is no
assurance that the Firm’s litigation reserves will not need to
be adjusted in the future.
In view of the inherent difficulty of predicting the outcome
of legal proceedings, particularly where the claimants seek
very large or indeterminate damages, or where the matters
present novel legal theories, involve a large number of
parties or are in early stages of discovery, the Firm cannot
state with confidence what will be the eventual outcomes of
the currently pending matters, the timing of their ultimate
resolution or the eventual losses, fines, penalties or impact
related to those matters. JPMorgan Chase believes, based
upon its current knowledge, after consultation with counsel
and after taking into account its current litigation reserves,
that the legal proceedings currently pending against it
should not have a material adverse effect on the Firm’s
consolidated financial condition. The Firm notes, however,
that in light of the uncertainties involved in such
proceedings, there is no assurance the ultimate resolution
of these matters will not significantly exceed the reserves it
has currently accrued; as a result, the outcome of a
particular matter may be material to JPMorgan Chase’s
operating results for a particular period, depending on,
among other factors, the size of the loss or liability imposed
and the level of JPMorgan Chase’s income for that period.